McDonald’s is expected to generate a modest profit from its $5 meal deal, with analysts predicting profit margins between 1% to 5%. This translates to roughly $0.05 to $0.25 earned for each meal bundle sold, according to restaurant analyst Mark Kalinowski.
The fast food giant sees this deal as a strategy to attract customers who are feeling the pinch of inflation, encouraging them to purchase additional items beyond the $5 offering once they are inside the restaurant.
However, profitability is contingent on various factors, including ingredient costs, labor expenses, and overhead. Arlene Spiegel, president of the consulting firm Arlene Spiegel & Associates, emphasized that the $5 meal deal is more of a promotional tactic rather than a significant profit opportunity.
She noted that while the combo might entice diners back to McDonald’s, franchisees—who own about 95% of the restaurants—set their own prices and contend with various costs such as rent, insurance, permits, and taxes.
In a statement from May, McDonald’s U.S. president Joe Erlinger mentioned that franchisees are working to reduce overhead by implementing promotional offers like the $5 meal. Nevertheless, Spiegel stated that the deal often serves as a “loss leader,” aimed at attracting customers, but after accounting for labor, packaging, condiments, delivery fees, and marketing, franchise owners might find that their profit margins are significantly diminished or nonexistent.